Results matching “dukes”

Podcast on Wal-Mart v. Dukes - PointOfLaw Forum

"$7 million to sue Wal-Mart"? - PointOfLaw Forum

Reuters unquestioningly accepts the claim of Joseph Sellers of Cohen Milstein Sellers & Toll that the firm "is in the hole by about $7 million" for its role to date on the Dukes v. Wal-Mart litigation. (Note also Reuters unquestioningly accepting the incorrect assertion that it is common for lawyers to get 33% contingency fees in large class actions.) But the actual breakdown is "$5 million in attorney hours and ... $2 million on experts and discovery," which does not translate into $7 million in cash. While the experts would be paid in full in advance, the $5 million figure reflects substantial markups in time: a $400/hour associate does not cost Cohen Milstein $800,000/year nor does a $200/hour paralegal cost them $400,000/year. The $800/hour partners don't get to collect $800/hour from the firm unless they win. There's opportunity cost, to be sure, but if Cohen Milstein believed they had more profitable opportunities available to them, they would be litigating those cases rather than Dukes. (It's also entirely possible that that $5 million figure includes $35/hour temp document-review attorneys being billed out at close to ten times that in a case with millions of documents.)

I can't tell you whether Cohen Milstein does it, but even on the expense side, many clever law firms have their partners holding stakes in the profitable outside discovery vendors, effectively vertically integrating when it comes to "expenses."

So don't cry for Joseph Sellers. The out-of-pocket cost to Cohen Milstein is likely much closer to half the $7 million figure. Given that a victory or settlement in the litigation would be rewarded with an attorney fee of hundreds of millions of dollars, it would be a profitable gamble for Cohen Milstein to take the case even if they believed they had well under a 10% chance of success. And a firm of Cohen Milstein's size has a diversified portfolio of litigation that gets them closer to the Law of Large Numbers when they engage in risky litigation. There's a reason they didn't sell off part of this case to a litigation finance company to protect their downside.

Wal-Mart, on the other hand, is paying full fare for its outside counsel (and experts), and the internal expense of producing documents is always greater than the expense of reviewing them. They're not going to recover their millions of dollars of costs for being subjected to an improper class action suit, even if they're completely vindicated. The effect of this is to hurt employees: if every employee hire is a potential lawsuit, the wise employer counts the expected expense as a marginal cost of doing business, and reduces wages accordingly. Given the ratio of large contingency fees and defense expenses to class-member recovery (I doubt that employees collect as much as fifty cents of every dollar spent on employment litigation and the human-resources apparatus employers establish to reduce the costs of employment litigation), it's doubtful that the average employee would prefer the "benefit" of being able to sue to the increased wages they could receive if their employment was at-will. This is why you shouldn't believe the hype about the Dukes case: the Supreme Court decision benefits employees in the long run.

Wal-Mart bet post-mortem - PointOfLaw Forum

A post-mortem on my Wal-Mart bet, discussed June 5 and June 9.

For me to make money, a few things had to happen:

1. I had to be right that Wal-Mart v. Dukes would result in reversal. Check.

2. I had to be right that the marketplace would react as if this was a surprise, as had been my consistent experience. Even if the expected result was fully priced in, I expected a temporary surge in the price from day-traders irrationally responding to the opinion before the sharps traded the price back down. (I've seen this happen with other stocks just from getting favorable press coverage on CNBC.) Given the enormous market value of WMT, I expected a bounce between 1% and 4% in the stock price, which would correspond to a much larger bounce in the option price. Check: there was a 1.5% bounce after the Supreme Court announcement yesterday; that translated into an increase in the option prices of 20% to 50%. (Of course, post hoc ergo propter hoc doesn't fly: this isn't proof that I was right, rather than lucky, but I do think there was cause and effect.)

If I was right about those two things, my expected return was 15% to 60% depending on the size of the bump, minus the 4-5% transactions cost, plus or minus variance from other market factors.

Unfortunately, this variance issue meant I had to be lucky in two other factors:

First, there were eight or so possible days when the decision would be released; I had to hope the decision wasn't released on June 20, when I would be at a hearing in a courtroom, unable to act upon any rise in the stock price. Oops. By the time I learned of the decision at 1:30 PM, the day-trading bump from the news had disappeared.

Second, I needed the world to produce less bad economic news than good economic news. I was unlucky here: I purchased options June 1 to June 3, and there was bad economic news almost immediately; still, my break-even price was around $54, and I was ahead mid-day June 9. Then the Greek crisis hit, the stock dropped to $52.70 by the opening of June 20, and it was going to be hard for me to make my money back. And, indeed, the 1.5% bounce in the stock only went up to $53.50.

In the stock market, you can be wrong and make money, and right and lose money. It's better to be lucky than good. I'll liquidate today, and take a loss of over half my bet. C'est la guerre. I've made bigger financial mistakes in my life; I've had single trips to Las Vegas where I made more money than I lost on this three-week bet. (Heck, I'm an economist who understands opportunity cost. I lose more money than this every year I devote to the Center for Class Action Fairness instead of being a for-profit lawyer.)

Coverage: WSJ, proving that no publicity is bad publicity so long as they spell your name right; Frankel @ Reuters; Severino @ NRO; Ribstein; Blackman.

Wal-Mart v. Dukes & A.E.P. v. Connecticut - PointOfLaw Forum

In two major decisions today that will interest the readers of this site, the Supreme Court held that the class alleging gender discrimination against Wal-Mart was improperly certified in Wal-Mart v. Dukes and that the EPA's governance of carbon-dioxide regulation under the Clean Air Act displaced the federal common law public nuisance suit brought by various states and municipalities in AEP v. Connecticut. The holding in both cases was unanimous, though not without underlying disagreement. In Dukes, the justices split 5-4 over whether to dismiss the suit outright (the majority decision) or whether to remand for further consideration as a 23(b)(3) class action (Justice Ginsburg's position, joined by Justices Breyer, Kagan, and Sotomayor). In AEP, the justices split 4-4 on whether the plaintiffs had standing to sue (presumably the same split as in Massachusetts v. EPA), and Justice Alito wrote separately, joined by Justice Thomas, to emphasize that his decision rested on the assumption that the Clean Air Act applied to carbon dioxide emissions (the position he rejected in Massachusetts v. EPA) (Justice Sotomayor, who was involved in the suit below, recused).

Those who didn't see our earlier discussion on Dukes, which pulled in various thinkers and practitioners, should check it out now and compare with the actual decision. The Manhattan Institute also wrote a fair amount on the AEP global-warming-as-public-nuisance case in last fall's Trial Lawyers, Inc.: Environment.

Josh Blackman summarizes Dukes here and AEP here. Walter Olson assesses Dukes here. And as Blackman notes, the Dukes decisions, both majority and dissent, are replete with citations to our dear departed friend Richard Nagareda's published writings, both The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n. 110 (2003) and Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 131-132 (2009).

Further thoughts on the Wal-Mart market bet - PointOfLaw Forum

I'm getting two major types of skepticism about my market bet on Wal-Mart v. Dukes, which I paraphrase as follows:

  • "Your bet makes no sense because everyone already knows that the Supreme Court is going to reverse Dukes."
  • "Your bet is too risky because there's a sizable chance the Supreme Court won't reverse Dukes."

I humbly suggest that the existence of the latter argument refutes the former.

That said, I have less confidence that I played this right than I did a few days ago. I think I underestimated the effect of the underlying variance of the options I purchased: it probably would have been sounder to purchase in-the-money options or longer-term options, even at the expense of somewhat muting the upside. (Transactions costs from the bid-ask spread mean that it doesn't make much sense to switch horses now.) I admit it's sometimes a little unnerving to see a $6000 fluctuation over the course of writing a blog post, and back up another thousand while I was writing this sentence.

In blackjack, if you're dealt an eleven and the dealer is showing a six, you double down. You don't double down because you're guaranteed to win: you might get a three, or the dealer might have a five as a hole card and end up with a 21. You double down because the odds are in your favor, and that's when you put your money on the table. Because of the random walk of stock prices, the noise from day-to-day movement of the stock price (which, unfortunately, dropped somewhat over the last week for reasons unrelated to the soundness of my hypothesis) may well overwhelm the signal from a Supreme Court decision. So I could be right ex ante and still lose money ex post; conversely, there's a chance that I'm wrong ex ante and still come out ahead ex post.

I'm not all that worried that I'm betting against the efficient market hypothesis. I've done something similar before. In February 2006, I blogged that proposed asbestos reform in Congress was very likely to fail after previously arguing that the Specter-Leahy bill was bad public policy. But the Associated Press reported that the bill was likely to pass; the reporter seemed unaware of a Senate procedural mechanism that would permit a minority to block the bill while simultaneously voting against a filibuster. In response to the AP story, asbestos-related stocks shot up in anticipation of a de facto bailout. I shorted those stocks, and closed out the position $14 thousand ahead a week later when Senator Ensign's point of order got the 41 votes needed to block the bill. And, as Alex Tabarrok reminded me, if I'm wrong and the efficient market hypothesis is correct, then my expected loss from the purchase is merely my transactions costs.

More coverage: Koppel @ WSJ; Frankel @ Reuters; Crede; earlier.

Investment disclosure - PointOfLaw Forum

Over the years I've been surprised when the stock market strongly reacted to judicial decisions that seemed like obvious outcomes. This surprises me: I don't have inside information; institutional investors have the ability to process the same public information that I do; the efficient market hypothesis predicts that this public information should already be reflected in the stock price; thus, if I can predict a ruling, the market can, too, and shouldn't treat it as a surprise when, say, the Illinois Supreme Court reverses a multi-billion-dollar judgment against Philip Morris, which bounced over 5% that week in December 2005. But apparently, the trial lawyer strategy to artificially depress stock prices to pressure defendants into settlements has an effect of creating market inefficiencies.

I'm very confident that Wal-Mart v. Dukes will result in a reversal of the class certification in the enormous multi-billion dollar class action against it. But the things that make me confident in that result—the briefs, the tenor of the oral argument, the language in AT&T Mobility v. Concepcion about the importance of protecting the rights of unnamed class members—did not produce movement in the market price of Wal-Mart stock. This leads me to suspect that the market is undervaluing the probability of reversal, and will be surprised when the Supreme Court does reverse later this month.

It's always bothered me when economists make clever predictions but aren't willing to bet on them, Julian Simon a notable exception. Here's a hypothesis that won't take twenty years to resolve; if I'm right, aren't I stupid if I don't make a quick profit on this predicted market inefficiency. So I've put my money where my mouth is: with the dip in stock prices last week, I invested a bit over 10% of my net worth in a leveraged bet that WMT stock will bounce this month when the Supreme Court releases its decision through purchases of July and September out-of-the-money call contracts.

Now I don't recommend anyone follow my lead: there are lots of ways I can be wrong. I might be overestimating the probability of Wal-Mart success in the Court, or otherwise suffering from Dunning-Kruger Effect. I might have been lucky (or suffering from selective memory) in previous cases where I observed stock-price movement in response to decisions I predicted. The market might have already priced this result in years ago, or think that the suit is just a minor nuisance relative to Wal-Mart's giant market value. And we could get hit with a terrorist attack or some other economic shock that hurts the price of Wal-Mart stock entirely unrelated to the Supreme Court decision. Moreover, options are expensive: I'm paying something like a 4-5% transactions cost between brokerage fees and bid-ask spreads, and then there will be the short-term capital gains taxes that reduce any upside. So I could be feeling pretty sheepish come July 1.

But now my interest in this case is a bit more personal than whether the Supreme Court gets class action law right.

Update: Larry Ribstein comments.

A lot of ink will be spilled discussing Concepcion.  Yesterday's decision may well have killed off, at least for companies that enter into validly-formed contracts with their customers, the kind of "spoils for the lawyers, crumbs for the class" class action that is of recent (<20 years) vintage and really deserves to die.  Indeed, one could almost hear Justice Scalia thinking of Russell's "Tort Twits" as he was writing the majority opinion.

That five Justices don't like consumer class actions very much isn't a surprise.  Just how broadly impactful the Concepcion decision will be, however, remains to be seen.  I, for one, will be mighty interested to watch what the Second Circuit does if it is asked to reconsider its decision from last month in the American Express Merchants' Litigation matter.  In that antitrust case, the Second Circuit refused to compel individual arbitration, as Amex's card acceptance agreement would require, because antitrust litigation is (in the court's view) so expensive to litigate that it would be economically irrational to do so if there can be no pot of class action gold for the lawyers at the end of the rainbow.  Removing the possibility of class certification, the court believed, would frustrate the purpose of the antitrust laws and leave the aggrieved merchants without a remedy.  If the Second Circuit reverses field in light of Concepcion, and sends that case to arbitration despite its misgivings, we will be able to hear the plaintiffs' bar screaming "Katy, bar the door."  If it does not, however, that decision will poke one very big hole in Concepcion that the Supreme Court will be asked to fill (but may not).  There are other potential holes in Concepcion, too, as I have written in an article I hope will be published next week.  More on that later.

(There's also that awfully pregnant footnote 6 in Concepcion, where Justice Scalia invites states to adopt a patchwork of regulations governing adhesive arbitration agreements, subject to what can only be described, with apologies to Justice Scalia, as an "undue burden"-like test to judge whether the state has made it too hard to arbitrate.  But now I'm really digressing from the topic at hand.)

The question on the table is whether Concepcion presages a blowout victory for Wal-Mart in Dukes.  I can't deny that Concepcion moves the needle in that direction.  For some reason, however -- be it actual wisdom or sheer stubbornness -- I still just don't think so.

I do agree with most everything in Russell's last post.  I believe the Court's decision in Dukes will (1) strongly reaffirm the idea of "rigorous scrutiny," (2) stress that district judges must have a clear and workable (i.e., lawful) plan as to how a class case will be tried, and (3) preclude using (b)(2) classes in situations that really must be scrutinized under (b)(3).  But now ask yourself:  Did the oral argument in Dukes suggest that a single Justice disagrees with any of these points?  (The district judge in Dukes had a trial plan, but as even the sympathetic Justices noted, that plan would have unlawfully prevent Wal-Mart from raising defenses it has a legal right to assert.)  Indeed, since the Second Circuit, in In re IPO, repudiated its earlier decision in In re Visa/MasterCard Antitrust Litigation ("we don't have to listen to the defense expert on certification issues if the plaintiff's expert's certification theory isn't facially insane"), has any Court of Appeals -- other than, of course, the Ninth Circuit in Dukes, by a mere one-judge majority -- diverged from these views even a little bit? 

I think, then, that Russell can get everything on his wish list, in language clear enough for every district judge in the country to understand, in an 8-1 or 9-0 opinion.  The question remains, however, whether the five-justice Concepcion majority will want to go further, blocking any kind of certification in Dukes and doing so in terms that blast Rule 23 to smithereens, or whether the Justices will agree unanimously, or close to it, to reverse the back pay certification but leave open the possibility of a narrow class that focuses on whether past discrimination, if proved, should yield a prospective injunction.

Will the five conservative Justices who agreed in Concepcion forego a chance for consensus if it exists?  I can't pretend to have special insight, but I don't think so.  If I'm wrong about this outcome, it's likely to be because I'm overestimating the Concepcion minority's hostility toward what the lower courts did in Dukes.  If Justices Breyer, Ginsberg, Kagan and Sotomayor want to write an opinion that would uphold the lower court's certification order in (or close) to its entirety, the winning five, who clearly disagree, might as well go to town when reversing.  But I just don't see it.     

Upon Reading Concepcion While Dukes Gestates - PointOfLaw Featured Discussion

Today the Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion, No. 09-893 (U.S. Apr. 27, 2011).  At first glance, it doesn't seem that Concepcion -- which addressed whether California could use its "unconscionability" precedents to invalidate any consumer arbitration contract that included a class action waiver -- would have much to do with the issues in Dukes, which concerns whether a massive employment discrimination class action should have been certified.

And yet, in Concepcion, a five-Justice majority based its decision, in part, on just how difficult it is to create and adhere to procedures that achieve fundamental fairness in class adjudications.  The Court was expressly concerned with the due process rights of absent class members who would be bound to the decision in a class arbitration.  It mentioned the importance of opt-out rights where money damages were involved.  The Court also was worried about how to manageably conduct class discovery.  And it was concerned about the rights of defendants.

I'll confess, Jeff, that when I sat down to write my prior post, it initially felt like I was (once again) asking Santa for all of the things that my teacher-parents couldn't afford.  But as I thought more about it, many of the things on that list really are necessary to reaching the result that I think the majority will reach, which is reversal.  For example, I think they have to genuflect to the "rigorous scrutiny" standard.  And while they may not go so far as requiring plaintiffs to propound a trial plan in every case, even you and Andrew believe the focus will be on how the case would be tried.

Similarly, the notion that a (b)(2) class isn't a way around the predominance and superiority requirements of (b)(3) is something that it seems the Court has to espouse, even though it may not say money is never, ever recoverable in a (b)(2) class.

I'll admit that I'm both pleased and excited to see the mentions in Concepcion of adequacy of representation and the need for opt-out rights where money is involved.  This confirms to me that these issues are still at the forefront of the Court's mind.  And I liked Justice Scalia's statement that switching from an individual claim to a class claim sacrifices informality and is "more likely to generate procedural morass than final judgment."  Slip op. at 14.  This sounds like someone who understands the manageability problems associated with class adjudication.

I'll confess that where, as here, the case was well-argued by the defense, I'm prone to see the glass as half full.  Heck, I was even a member of the Optimist Club in my Missouri hometown.  But I wonder, Jeff, if reading Concepcion gives you even a little more hope that Dukes will be a broader, more instructive opinion?

(Lest you think I've totally drunk the Kool-Aid, I'd be happy to kvetch with you over drinks -- but not here -- about Concepcion's place in the Supreme Court's topsy-turvy preemption jurisprudence.)

Greetings, all. My name is Jeff Jacobson. I'm a litigation partner at Debevoise & Plimpton LLP and, like some other posters here, I represent clients in consumer class actions. I am a big fan of every member of the panel Ted has assembled and I am grateful to Ted for allowing me to join the discussion. (Please note the usual disclaimers: I am not involved in the Dukes case, the opinions I express aren't necessarily that of my firm or any client, etc.)

My hoped-for outcome in the case is similar to Russell Jackson's. The outcome I find myself expecting, however, is different and substantially narrower. I do not think it an accident that, since the Supreme Court decided the Falcon case in 1982 with its "rigorous analysis" language, the Court has declined chance after chance to narrow Rule 23. As many of us painfully recall, the Court did not even grant certiorari in the Visa/Mastercard antitrust litigation, after the Second Circuit upheld a district judge's certification of a multi-million merchant Leviathan of a class that, ironically, included Wal-Mart. The Second Circuit "repudiated" (its word) that horrible decision later in In re IPO, and here we are hoping that the Supreme Court now adopts an analysis similar to, if not more sweeping than, the Second Circuit's new view, when the Court refused to correct the Second Circuit's whiff in 2001. My suspicion is that we in the defense bar may be disappointed, and that the decision the Supreme Court is to issue in the Dukes case will be substantially less broad and impactful than many seem to be expecting.

Andrew Trask is correct, I think, that the Court's decision will turn on the district court's and the Ninth Circuit's inability to say how the Dukes case possibly could be tried. The district court recognized that the "usual" process of proving discrimination in any particular employee's case couldn't work here. In a usual case, even if the plaintiffs managed to demonstrate at a class action trial that Wal-Mart had some discriminatory policy, Wal-Mart still should be able, at the stage where some individual human being seeks retrospective damages, to present individual evidence it believes proves that the discriminatory policy did not affect that employee. The district court's rather radical proposal was to ban Wal-Mart from presenting individual evidence and, in the event the plaintiffs win, to let the plaintiffs rely solely on whatever statistical model ended up yielding that win to decide how much Wal-Mart should pay in damages. Though I am merely an amateur Supreme Court-watcher, it seemed clear from the oral argument that at least eight justices, and possibly all of them -- the wildcard being Justice Ginsburg -- agree that the district court's proposal was dangerously wrong. Even Justices Sotomayor and Kagan openly expressed disagreement with the district court's approach.

Justice Sotomayor, eventually joined by Justice Kagan, did not seem at all inclined to defend the district court's inclusion of back pay awards among the issues to be resolved on a class basis. Justice Sotomayor's approach, as expressed at oral argument, seemed to be to try to find a way around the problem, and let the case proceed on a class basis at least in part, by stressing the plaintiffs' request for forward-looking injunctive relief. Justice Sotomayor essentially said to the plaintiffs' lawyer, "forget back pay -- what would your prescriptive injunction look like?" The plaintiffs' counsel responded that plaintiffs would seek a set of specific steps removing managers' discretion and ensuring that future decisions at Wal-Mart are made on a more gender-neutral basis. Justices Sotomayor and Kagan seemed to like that answer, and certainly seemed more than willing to let the district court try a case about whether such a forward-looking injunction is necessary and appropriate. At the same time, however, the Justices seemed resigned to, and possibly even in agreement with, an outcome that would reverse the district court's decision to include back pay in the putative class certification.

Importantly, although Ted Boutrous made the point for Wal-Mart that class members' future-damage claims would be barred by res judicata if a back-pay case went to verdict and Wal-Mart won, no Justice asked him what (if any) res judicata effects would result if the class litigated only over Wal-Mart's supposed policy problems and the need for a forward-looking injunction to correct them, and did not litigate the question of whether or how much the now-enjoined practice may have cost individual employees in the past. I am no employment lawyer, but it would seem the right answer would be that even if the plaintiffs litigate just the policy and forward-looking case, and lose (i.e., because there was no company-wide policy to discriminate), individual employees still would be free to argue that they were discriminated against in the past and suffered damages as a result.

Let's assume for a minute that I am right, and eight or even nine justices agree that the named plaintiffs fail to satisfy Rule 23(a) on typicality grounds -- what Russell Jackson's blog and Ted Boutrous's argument both (correctly, in my view) called "cohesion." If I am right, this would suggest that the Court could issue a relatively narrow decision on that basis and command the kind of unanimity that might give such a closely-watched decision maximum legitimacy. Would the Chief Justice really pass up a 9-0 or 8-1 ruling in this case if he could get one? And, by the way, how sure are we that five votes even exist for the kind of barn-burning decision the defense bar dearly would love to see?

For these reasons, I find myself predicting such a narrowly-framed decision: Certification reversed, 9-0 or 8-1, for failure to satisfy the commonality and typicality "cohesion" requirements of 23(a), along with a concurrence by (at least) Justices Ginsburg, Sotomayor and Kagan encouraging the district court to consider certifying a true injunctive class on remand. There may be another concurrence or two from the right wishing the Court had gone further, but only a concurrence.

Even in a narrow decision, however, I think we defense types will get our wish that the Court should address the standard judges must follow when weighing competing expert testimony at the class certification stage. This is not just a matter of Daubert, though I agree with James Copland that Daubert must apply to proposed testimony related to Rule 23 issues. The bigger question, and one I think the Court should and probably will answer in the affirmative, is whether courts must *weigh* competing expert testimony and decide, after giving due consideration to the defendants' expert's conclusions, whether the plaintiffs really will be able to prove their case on a common basis. Ted Boutrous rightly stressed that the district court chose to ignore Wal-Mart's expert, finding it his responsibility only to consider whether the plaintiffs' expert put forward a theory that might hold up at trial. As the Second Circuit correctly (in my view) held in In re IPO, that simply cannot be right.

A narrow decision, however, might well allow the Court to duck the circuit-split over when you can seek monetary damages in a (b)(2) case. If they do tackle that issue, the oral argument suggested the Court's majority will adopt the rule that damages must to flow automatically, without need for individual fact determinations. That decision hardly would surprise anyone.

The bottom line, for me, is that although I think there are at least four justices in favor of turning the Wal-Mart suit off completely, and doing so in the sweeping terms for which Russell is hoping, there may not be a fifth, and even if that's wrong, if the Chief Justice sees a chance for unanimity, a narrow decision on typicality grounds may seem a lot more attractive than a bitter split with the three women Justices on the losing side.

I am looking forward to hearing what my most esteemed colleagues think of this.

My Wish List from Wal-Mart - PointOfLaw Featured Discussion

 I come at Dukes as a defense lawyer who handles consumer fraud/mass torts class actions.  I’m no employment lawyer, and the subtleties of substantive employment discrimination law often elude me.  I’ve previously said the Ninth Circuit’s en banc opinion was in large part peculiar to its employment discrimination context.  But the Supreme Court’s opinion is likely to reach further.

I thought I’d approach Jim’s and Andrew’s questions by suggesting what I (perhaps overly-optimistically) expect to see in the Supreme Court’s Dukes opinion, which I believe will reverse certification.

1.  District courts must give rigorous scrutiny to whether the class action prerequisites are met, paying special attention to how plaintiffs and defendants will introduce evidence to establish the elements of their claims and defenses.  The Court likely will reiterate the “rigorous scrutiny” standard.  Hopefully, it will actually explain what that means.  Many courts require that the parties put forward a trial plan that shows whether the elements of the class members’ claims really can be established manageably with common proof.  This goes directly to Andrew’s question.

2.  Rule 23 is a procedural rule that cannot alter the substantive claims or defenses.  Part of the problem with including back pay in this class action is that Wal-Mart is entitled to prove for each claimant that the decision not to promote or give a raise was for reasons other than discrimination.  The Rules Enabling Act cannot deprive Wal-Mart of this substantive right merely to promote convenience.

 

3.  You can’t use a mandatory class to elude the prerequisites for an opt-out class.  Rule 23(b)(3) explicitly requires “predominance” and “superiority.”  Rule 23(b)(2) doesn’t.  But I’ve previously persuaded courts that 23(b)(2) has an inherent “cohesiveness” requirement that is at least as strict as predominance and superiority.  See, e.g., Compaq Computer Corp. v. LaPray, 135 S.W.3d 657 (Tex. 2004).  Everyone concedes that the Dukes class couldn’t meet the predominance and superiority requirements of an opt-out class.  It would be ironic, indeed, if it was easier – rather than harder – to bind absentees to a mandatory class judgment.

 

4.  Money is not an available remedy under Rule 23(b)(2).  Although I doubt a bright-line actually will emerge, the rule’s plain language suggests that it should.  At the very least, money awarded under 23(b)(2) should be truly communal – just like the injunctive and declaratory relief – and incidental, such that no one would bring the claim for the monetary relief alone.  Attorneys’ fees might fit that bill.  Back pay does not.

 

5.  The canard that the need for individualized damages determinations cannot preclude class certification should be shot.  Size matters.  And where the putative class members number in the hundreds of thousands, individualized anything precludes certification.

 

6.  Intra-class conflicts fail the adequacy of representation requirement.  Ted Boutros painted a compelling picture of a female supervisor (and class member) being cross examined by (her) class counsel for allegedly making discriminatory decisions.  The Court is particularly sensitive to adequacy issues, and this is unquestionably one.

 

7.  Expert testimony merits particularly close scrutiny at the class certification stage.  Even if the court doesn’t require a full-on Daubert analysis, the expert should be required to demonstrate a workable methodology that can address the elements of the claim with classwide proof.  I’ve written and posted on cases that articulate this rule compellingly.  In Dukes, you’d at least expect a showing that a reliable store-by-store model can be created to actually demonstrate discriminatory impact.  Plaintiffs made none. 

 

8.  Although courts should not reach to judge the merits at the class certification stage, they must decide merits issues where necessary to determine whether the class action prerequisites are met.  Deciding whether admissible expert testimony can support classwide proof may trigger this rule. 

 

That’s my wish list.  A guy can dream, right?

Our discussion of Wal-Mart v. Dukes has begun. Expected participants include Lester Brickman, Matthew Cairns, Jim Copland, Richard Epstein, Myriam Gilles, Russell Jackson, and Andrew Trask.

How do you hold a Wal-Mart sized trial? - PointOfLaw Featured Discussion

Professor Epstein's article is a tough act to follow, since he provides an excellent summary of the issues at stake in the Wal-Mart case. (No surprise; he's been doing this for years.) So instead of arguing with him over what he did say, I'd like to focus on a slightly different issue.

As a practicing class-action lawyer--and a defense one at that--my concerns about this case are more pedestrian. The biggest question I've been wrestling with is how the Ninth Circuit envisioned a classwide trial would actually proceed. The en banc opinion doesn't say much about how to try the case. In fact, it only offers two concrete pieces of guidance: (1) that the parties may use aggregate proof in the form of statistics; and (2) that the parties might look to Hilao v. Estate of Marcos (a class action on behalf of Filipino torture victims) as an example of how to try a class action like this.

But neither of these suggestions would be much help in an actual trial. Let's say the parties did use the aggregate proof at their disposal. And let's say that the plaintiffs convinced a jury that--as their expert put it--excessive subjectivity allowed gender discrimination. Can any female Wal-Mart employee borrow that answer to prove her individual claim? No, because she hasn’t established the subjectivity caused (even in part) the discrimination against her. The same goes for the plaintiffs' social-science evidence. Does Wal-Mart's corporate culture encourage gender stereotyping? Even if we say yes, we have not established a link between that culture and any concrete act of discrimination.

This is not an abstract concern. The Eleventh Circuit recently struggled with what happens when a court certifies a class to prove toothless but common questions. Its conclusion: a trial court still must hold individual hearings to determine liability for each class member's claim.

Nor will relying on Hilao for guidance help much in this case. The Hilao case involved only 10,000 class members, less than a hundredth of the number here. And it relied in part on statistical proof.  Nonetheless, the jury in Hilao, even with the help of a special master, required eighteen months between its finding of general liability and its finding of damages. Extrapolating that trend out (and given these are adversarial proceedings, there's no reason not to), it would take a jury 150 years to determine all of the back pay in this case.

So, my question is: did the Ninth Circuit really expect this case to be tried? If so, was this method really more efficient than individual trials? And should a court certify a case expecting it will settle rather than go to trial?

Opening thoughts and questions - PointOfLaw Featured Discussion

I'm  excited to see what some of our guests have to say on the pending Supreme Court case, Wal-Mart v. Dukes, which is in essence the mother of all employment-law class actions. Richard's piece is a good start, fleshing out how two areas of law -- employment discrimination law and class actions -- come together here. I'll start with a few questions, pulling out the key issues as I see them:

  1. The class action rule at play. When I wrote about this case after initial reports that it was certified at the trial-court level, I noted how it didn't fit under a traditional 23(b)(3) schema. Of course, as is now obvious, the certification rule at play isn't (b)(3) but rather (b)(2). It would seem to me that using (b)(2) here is disingenuous. To begin with, it's hard for me to see how the damages at issue here don't force this case into a (b)(3) framework. Even Justice Ginsburg -- hardly a critic of litigation generally or employment-discrimination litigation specifically -- seemed to recognize in oral argument that there's a pretty serious issue about how to handle the damages phase in a way that doesn't adversely affect the interests of many (realistically thousands or hundreds of thousands) of class plaintiffs. Doesn't using (b)(2) here swallow the (b)(3) rule? And if so, wouldn't (b)(3) be somewhat superfluous, at least in similar types of cases? And even under a (b)(2) rationale, the injunctive remedy isn't at all clear here; it's a far cry from the nuisance abatement scenario Richard describes, and short of Wal-Mart completely centralizing and reconstructing its hiring practices, under court supervision, how exactly is an injunction supposed to work?   I'd be very interested in hearing more about these issues from some of our experts more versed in class-action practice.
  2. Expert evidence at the class certification stage. A key question before the Court is of course the degree to which it's proper to rely on the plaintiffs' expert evidence to establish their theory of the case, both to establish that discrimination exists and to tie it somehow back to Wal-Mart, with respect to all of its female employees. If Daubert review isn't appropriate at the class-certification stage, I don't see how any court could evaluate claims in a case like this: effectively, any employer likely has some gender or race or other disparity in its hiring or promotion patterns, and it's always possible to concoct some theory to explain such disparities. Don't we have to have some standard to evaluate such claims before launching a class-action claim that could leave an employer's hiring practices under court control?
  3. How this case intersects with "disparate impact" in employment discrimination cases. I think Richard is right to focus on disparate impact here. As some of the justices suggested at oral argument, there's some tension in the plaintiffs' theory: on the one hand, Wal-Mart is responsible for gender disparities in promotion and pay across all its stores nationwide; but it's responsible under the theory that its promotion and pay practices are too decentralized, leaving decisions up to individuals who are, at least in some cases, likely to be governed by prejudice. Isn't this rationale just a backdoor way to solidify a disparate-impact standard -- requiring that large employers centralize decision-making to avoid disparities in hiring, pay, and promotions? How does the theory here jibe with the Supreme Court's rulings on disparate impact, such as the recent (race) case Ricci v. DeStefano?

So, at the outset, I have lots of questions. I look forward to fleshing them out.

Point of Law has been following the gigantic Dukes v. Wal-Mart litigation for years, and the recent Supreme Court argument certainly does nothing to lessen its importance for issues of class action certification, aggregate litigation, employment litigation, punitive damages, the use of statistical evidence by courts, and even the politicization of the judiciary. We have brought together a fascinating group of scholars and practitioners to discuss the case in this featured discussion, and are looking forward to it. In alphabetical order:

  • Lester Brickman is a Manhattan Institute visiting scholar and a professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University. He is the author of the recently released Lawyer Barons.

  • R. Matthew Cairns is a shareholder/director at Gallagher, Callahan & Gartrell and the 2011 president of DRI.

  • Jim Copland is the director of the Manhattan Institute's Center for Legal Policy.

  • Richard Epstein is a Manhattan Institute visiting scholar and was appointed the Laurence A. Tisch Professor of Law at New York University School of Law in 2010. He is also a senior lecturer at the University of Chicago, where he was on the regular faculty until his retirement at the end of 2010.

  • I'm Ted Frank, an adjunct fellow with the Manhattan Institute, and the founder of the Center for Class Action Fairness.

  • Myriam Gilles is a a professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University.

  • Russell Jackson is a partner at Skadden. His blog is Consumer Class Actions & Mass Torts.

  • Andrew Trask is counsel at McGuireWoods and the co-author of The Class Action Playbook. He blogs at Class Action Countermeasures.

We hope to have others join us as the discussion goes on. To start things off, let me point to Richard Epstein's essay on the case for the Hoover Institution, "Wal-Mart's Class Action Conundrum". What do others think?

Wal-Mart v. Dukes - PointOfLaw Featured Discussion


Wal-Mart v. Dukes - PointOfLaw Forum

Around the web, March 16 - PointOfLaw Forum

  • Trask on Wal-Mart v. Dukes. [WLF]
  • $90 million Illinois asbestos verdict on a theory of causation ridiculously attenuated even for the sad standard of Illinois asbestos cases. "Owens-Illinois was assessed $40 million in punitive damages and Honeywell International Inc. and Pneumo Abex were assessed $20 million each, even though there were no allegations by the plaintiff in the case that he ever worked for, or was exposed to any asbestos-containing materials made by the three companies." [ILR]
  • California bill would take punitive damage amounts away from California juries. Not clear to me what this accomplishes, other than perhaps removing the interim step of asking the judge to reduce the jury's punitive-damages award. But without a non-economic damages cap of some sort, the result is still effectively uncapped punitive damages. [Cutting]
  • Mississippi Highway Safety Patrol on hook when fleeing criminal kills man in car accident. Of course, if criminals know that the way to have police stop chasing them is to drive recklessly, we'll see more criminals driving recklessly (and escaping and committing more crimes), so it's not clear what tort liability accomplishes here other than punishing innocent taxpayers. [Clarion-Ledger via Torts Prof]

  • Sixth Circuit attempts to reverse Tinker for "racially hostile" speech. Doubtful Supreme Court will concede the issue. [Volokh; Defoe v. Silva; Judge Boggs dissent from denial of rehearing en banc]
  • Trial begins in IJ "blight" eminent domain case in San Diego. []
  • Nobody likes Ted Frank. (Not clear what Facebook accomplishes with this page.) [Facebook]

Around the web, January 31 - PointOfLaw Forum

  • "Fighting Suits Saves Money for Chicago." Too many defendants fail to recognize that the short-term benefit of settling a single case cheaply costs more in the long run by attracting lawsuits that wouldn't have been brought otherwise. [NYT via @icjl]
  • Glenn Reynolds interviews Benjamin H. Barton, author of "The Lawyer-Judge Bias in the American Legal System." [PJTV; Bainbridge]
  • Avandia MDL judge, having made a bad Daubert decision on general causation, makes a bad one on specific causation as well. [Schachtman; earlier]
  • Ed Warren and Dan Troy on punitive damages. [GMU Law]
  • PLF brief in the Wal-Mart v. Dukes case. [PLF]
  • Todd Zywicki isn't surprised that credit card rates are at a record high after recent "consumer-protection" legislation. [Volokh]
  • IJ begins its fight on behalf of vending trucks. [Daily Caller]
  • Susan Saladoff of "Hot Coffee" runs away from interview with lawyers who might be skeptical of her one-sided take. [Abnormal Use]
  • Don't be so impressed by China's airports. [FrumForum]

Frank on Dukes - PointOfLaw Forum

I have an op-ed in today's Washington Examiner on the Wal-Mart v. Dukes case.

Around the web, December 10 - PointOfLaw Forum

  • Thorogood v. Sears, Roebuck & Co.—the Seventh Circuit case that keeps giving us good opinions, this one the fourth in a series. [LNL; NLJ; Courthouse News; SBM Blog; ABAJ; Wisconsin LJ] (Update: and Drug and Device Law later this morning.)
  • Radio story about ADA filing mill. [This American Life via CJAC]
  • Will $189 million Hurricane Ike settlement be opened to the public? [Austin American-Statesman via ABAJ]
  • Bad idea division: Washington Supreme Court abrogates economic loss doctrine. [Jackson via OL]
  • Wal-Mart v. Dukes case features intersection of two conflicting strains of Justice Ginsburg's jurisprudence: distaste for procedural shortcuts of class actions and friendliness to gender discrimination claims. [Lahav]
  • Dumb syllogism department: "I think reproductive rights are important. There are some important reproductive rights cases. Therefore all law students should be required to take courses in reproductive rights law." [ATL]
  • When will SEC run afoul of the First Amendment? [Bainbridge]
  • Dog bites man department: Dahlia Lithwick not especially entirely intellectually honest in characterizing conservative legal arguments. Again. [Kerr @ Volokh; Bernstein @ Volokh]
  • I stand corrected. ("Forget" was definitely the wrong verb.) [Ribstein @ TOTM]
  • Actor who played the Johnnie Cochran parody on "Seinfeld" very impressed with himself; thinks hot-coffee case was silly. [Abnormal Use]

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